- After the “flippening” of Tether and Ripple, Ripple CTO David Schwartz stated that XRP has more use cases than the stablecoin because of its centralized nature.
- Issuing stablecoins on the XRP Ledger can combine the advantages of two worlds.
The new Tether (USDT), which has been flooding the market in recent weeks, has caused Ripple (XRP) to lose its third place in the ranking of the largest cryptocurrencies by market capitalization. With a total market capital of around USD 8.8 billion, Tether is now clearly ahead of Ripple (XRP), which has a capitalization of USD 8.6 billion at the time of publication.
The “flippening” between XRP and USDT has also led to an interesting discussion on social media. An XRP investor and Twitter user, XrpAda, reached out to David Schwartz, Chief Technology Officer (CTO) of Ripple, and questioned whether Tether has “more use cases” than XRP. Schwartz responded to the question and explained that both cryptocurrencies have different use cases.
According to Schwartz, a cryptocurrency like USDT, which is linked to the fiat money of a country that depends on trust in a central party, cannot be universal. In contrast, XRP is universal. However, Schwartz also admitted that XRP is volatile, which can lead to difficulties in many use cases.
I think they have different use cases. I don't think an asset pegged to one country's fiat through a central party you have to trust can be universal. But XRP has volatility that makes it harder to use in many use cases.
— David Schwartz (@JoelKatz) May 22, 2020
Is a XRP based stablecoin the solution?
It has been known for quite some time that Ripple is working on a functionality that allows companies to create their own tokens on the XRP Ledger. This would allow, for example, to issue stablecoins and thus also eliminate the problem of XRP volatility that Schwartz mentioned.
In relation to this, another XRP community member addressed Schwartz on how the collateral of an XRP based stablecoin issued by Ripple would be designed. Specifically, he asked Schwartz whether the stablecoin would be collateralized with a security deposit in the form of XRP by Ripple as a central entity or whether the collateralization would be implemented via digital IOUs.
Furthermore, the Twitter user “Great Gaspy” also wanted to know whether the stablecoin would have the same properties as XRP, in order to benefit from the properties of XRP on the one hand and to represent a decentralized money on the other hand. Schwartz replied to this:
They live in a weird in-between world. They’re not fully decentralized because their security relies on some entity to provide an accurate price feed. But a decentralized system manages their collateral and makes them work like XRP to make payments.